CFA response to the Closure of the FCA review into High-Cost Credit

The CFA has submitted its response to the FCA Call for Input to its review of High-Cost Credit, including the review of the High-Cost Short-Term Credit price cap, which closes today.

As explained by the government in their report ‘Capping the Costs of Payday Loans’ from 2013.

“The main aim of a cap is to ensure that payday loans customers do not pay excessive charges for borrowing and to minimise the risks to those borrowers who struggle to repay, to protect them from spiralling costs which make their debt problems worse. In short, far fewer payday loans customers should get into problem debt’.

Russell Hamblin-Boone, CEO of the Consumer Finance Association said:

“The changes in the high cost, short-term loans market have been significant and have led to clear benefits for consumers. The immediate impact has been lower interest loans and fewer charges, with fewer people missing payments. Firms now offer longer term loans with tighter affordability checks on borrowers. Having achieved its objectives the regulator now needs to ensure that the rest of the consumer credit market offers the same level of protection and customer service. We now need a regulatory framework that recognises that the former ‘payday loan’ market is no longer distinguishable from the wider unsecured credit market.”

Commenting on the new CFA research which was conducted with assistance from economic analysts, Oxera, Russell Hamblin-Boone, CEO of the Consumer Finance Association said:

“Important questions remain about the impact of regulatory intervention on the availability of credit. The CFA estimates around 600,000 people annually no longer have access to credit, which is more than double those expected to be excluded by the changes. In order for demand to be met by responsible lenders we need fair and equitable regulation across all credit services, so there is healthy competition, and customers are able to make informed choices.”

2. The CFA paved the way for the FCA’s statutory regulation by driving industry improvements and best practice through the implementation of an industry-wide Good Practice Customer Charter and the CFA’s own Code of Practice in 2012.